Flashcards in economics and analysis Deck (53):
-total value of all good and services
-consumer price index
-is a measure of inflation
describe an ideal economy
-GDP is up
-CPI is down
describe a general business cycle
-recovery-moves back up
what are the 5 leading economic indicators
-manufacturers' new orders
-S&P 500 index
-M2 (money supply)
-new unemployment claims
what are the 4 coincident economic indicators
-manufacturing and trade sales
what are the 2 lagging economic indicators
-duration of unemployment
what 3 things can influence the economy
-fiscal policy (congress/president)
-monetary policy (federal reserve)
how does fiscal policy affect economy
-taxation (high = deflation, low = inflation)
what is keynesian theory?
active government manipulation of the economy
describe M1 money supply
cash + demand deposits (checking accounts)
describe M2 money supply
M1 + CDs + money market mutual funds
describe M3 money supply
M2 + negotiable CDs
what are the tools that the federal reserve board can use to influence economy?
-open market operations
federal reserve board has control over?
bank reserve requirements
describe the multiplier FRB tool
-is the most drastic tool
-changes reserve requirements banks must have in their position
describe the fed funds FRB tool
-bank's excess reserves to lend
describe the discount rate FRB tool
-rate charged from feds to banks for loaning
-all rates are affected by the discount rate
describe the open market operations FRB tool
-fed buys t-bills from institutions to make interest rate go down
-fed sells t-bills to institutions to make interest rate go up
what happens if the value of a dollar goes up
-exports less competitive
-imports more competitive
what happens if the value of a dollar goes down
-exports more competitive
-imports less competitve
what are defensive (noncyclical) securities
basic human needs
what are cyclical securities
can go way up or way down
what are countercyclical securities
-precious metals (gold)
liabilities + net worth
assets - liabilities
current assets - current liabilities
current assets / current liabilities
long term debt / total capitalization
earnings per share=
net income / # of common shares
price to earnings ratio=
current market value / earnings per share
dividend payout ratio=
common dividends / earnings per share
when analyzing the market technically, what would a person use?
what is the odd lot trading theory?
says to do the opposite of what the little guys are doing
what are the 4 market indiices
-dow jones composite
describe the components of the dow jones composite
-looks at 65 companies
how many companies make up the NYSE composite?
how many companies make up the Wilshire composite?
how many companies make up the S&P?
what kind of recommendation for growth objectives?
-growth mutual fund and reinvest earnings
what kind of recommendation for income objectives?
-income funds and dont reinvest earnings
what kind of recommendation for preserving capital objectives?
-blue chip stocks
what kind of recommendation for liquidity objectives?
what is credit risk?
risk of company going bankrupt
what is business risk?
risk of industry doing poorly
what is market risk?
risk of market decline
what is purchasing power risk?
has to do with inflation risk
what is marketability risk?
ability to resale security
what is taxed as ordinary income?
describe passive income
says that passive losses can only be used to offset passive income
what is the 30 day wash rule
-investor exits position with a loss, then reestablishes position in an identical security with 30 days before or after trade
what are examples of progressive taxes?